A leg-up from Sebi

The Securities and Exchange Board of India (Sebi) has unveiled a consultation paper to revise the regulatory framework governing investment advisors (IAS) and research analysts (RAS).

The Securities and Exchange Board of India (Sebi) has unveiled a consultation paper to revise the regulatory framework governing investment advisors (IAS) and research analysts (RAS).

Among the suggested ideas are relaxing entry criteria, such as minimum qualifications, certifications, and net worth requirements; allowing part-time IAS, RAS, and independent compliance officers; and, relaxing the definition of "principal officer". Will these and other changes proposed by the new framework achieve Sebi's objectives? Over the past few years, the Indian stock markets have attracted millions of new investors. But, as the consultation paper points out, "the number of IAS/RAS today is not commensurate with the large investor base... This is leading to the proliferation of unregistered entities acting as IAS and RAS". Sebi wants the service of IAs and RAs to be available to more investors for whom "a much larger number of IAS/RAS is required". Will the proposed changes achieve this laudable objective?

The menace of illegal advisories

In an ideal world, investors' primary source of information should have been the traditional business media and, better still, Sebi-registered IAs and RAs. But like moths to the fire, millions of investors are attracted to social media for investing wisdom.

This is the domain of self-styled investment gurus, trainers, and influencers. Collectively, they are a formidable force. While Sebi has attempted to crack down on many of them it takes a lot of hard, painstaking work to investigate and establish facts, give them time to reply, make a case, issue a show-cause notice, and then pass an order.